Mallorca Insights

ECJ ruling: Parties can agree on the jurisdiction of a court of another member state regardless of their domicile

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The judgment concerns the interpretation of Article 25(1) of Regulation (EU) No 1215/2012 of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. Article 25(1) of the Regulation states that the parties may agree on the jurisdiction of a court of a Member State for existing or future disputes, irrespective of their domicile.

The specific case concerned a legal dispute over the jurisdiction of a court for an action for payment brought on the basis of an assignment of a claim. Both parties were domiciled in Slovakia. However, the action was brought before the Supreme Court of the Czech Republic on the basis of the jurisdiction agreement in the contracts.

This led to the question of whether two parties domiciled in the same state can agree that a court of another state, to which there is no connection at all, has jurisdiction by concluding a choice of court agreement. Is such a choice of court agreement sufficient to establish a cross-border situation and thus open up the applicability of Regulation No. 1215/2012?

The question of whether the limitation of the foreign connection to a jurisdiction agreement is sufficient to affirm the applicability of the Regulation or whether it is a purely domestic matter has so far been answered differently in case law and doctrine, with the result that this case was referred to the ECJ.

The European Court of Justice answered this question in the affirmative and ruled that a jurisdiction agreement in which the parties to a contract, who are domiciled in the same Member State, agree that the courts of another Member State have jurisdiction over disputes arising out of that contract falls within the scope of Article 25(1) of the Regulation. This applies even if the contract has no further connection with that other Member State.

In its decision, the European Court of Justice used the familiar methods of interpretation and relied in particular on the wording, meaning and purpose of the provision. The decision is also based on the principle of legal certainty and the parties' freedom of contract. The application of Article 25(1) ensures the predictability and effectiveness of choice of court agreements. It also contributes to the avoidance of parallel proceedings and facilitates the administration of justice within the European Union.

Once the competent court has been determined, the next question that often arises in cross-border situations is the applicable law. The applicable law is the law of the country which is decisive for the legal relationship or for the contract and is therefore applicable. The place of jurisdiction, on the other hand, is the place where the court has jurisdiction. Both can be specified by the parties in the contract. The applicable law can be determined using the Rome I Regulation. The Rome I Regulation is therefore a conflict of laws regulation with regard to international contract law. If the scope of application of the Rome I Regulation is opened, there is a free choice of law in accordance with Art. 3 of the Regulation. The parties can therefore determine the application of a specific law. Furthermore, Article 4 of the Rome I Regulation also contains provisions on which law is to be applied if such a choice of law has not been made.

However, it should be noted that there are certain overriding mandatory provisions that are not subject to the choice of law. According to Article 9(1) of the Rome I Regulation, a mandatory rule is a mandatory rule compliance with which is considered by a State to be so essential to safeguard its public interest, in particular its political, social or economic organization, that it must be applied to all matters within its scope, irrespective of the law applicable to the contract under the Regulation.

Tip: In order to avoid legal uncertainties, it is advisable to make a provision regarding the applicable law as well as an agreement on the place of jurisdiction. It may make sense to determine the competent court and the applicable law uniformly, as this allows the court to make a decision based on its highest professional expertise.

Dr. Dominic John Patrick Porta, LL.M.
Attorney at Law (Düsseldorf Bar Association n° 52954)
Abogado (ICAIB n° 6645)

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